India's factory sector activity in July grew at its most sluggish pace for eight months, a survey showed Wednesday, underlining the weakening state of Asia's third-largest economy.
The HSBC India Manufacturing Purchasing Managers' Index (PMI), a measure of factory output, slid to 52.9 in July from 55.0 the previous month -- the softest reading since last November -- on the back of weakening orders.
While a reading above 50 still indicates expansion, the figure marked the biggest one-month drop since September 2011.
"The bottom line is: manufacturing output and new orders decelerated but lingering inflation risks and hitherto lack of action out of Delhi limits the central bank's room to manoeuvre," said HSBC's chief India economist Leif Eskesen.
The data underlined the challenge ahead in re-firing India's spluttering economy for new finance minister P. Chidambaram, who was given the portfolio in a cabinet reshuffle on Tuesday.
Release of the report came a day after the Reserve Bank of India, citing still stubborn inflationary pressures, kept interest rates on hold despite calls from business leaders for urgent action to stimulate the economy.
The once-booming economy grew just 5.3 percent between January and March, its slowest annual quarterly expansion in nine years.
Rival China's manufacturing activity picked up modestly to a three-month high in July as factory output rose, boosted by government measures to stimulate the economy, according to a similar HSBC survey.
The July PMI for India pointed to slower growth in output and new orders, particularly from overseas.
India's headline inflation stands at 7.25 percent -- far above the central bank's comfort level of five to six percent -- while the consumer price index, which covers a smaller range of goods, is at over 10 percent.